The [Not So] Secret Path To A Million Dollar Portfolio:

Society has long conveyed the idea that you have to work well into your prime years to maintain or exceed the same lifestyle you have now. The idea of “work” and telling people your profession may often be portrayed as a status symbol. The same people who work well into their prime years realize that they constantly need to “work” for more money because they want to be able to afford nice things. Society has also constantly encouraged consumption of goods and services because consumption drives an economy forward and it is in the government’s best interest to have a majority of the population employed (think for a second why the unemployment rate is the topic on every President’s mind). 

The silent minority of the population thinks a bit different. The minority thinks the following way:

  • How can I continue working hard and grow in my career – spend some, however, save and invest most of my income?

    The minority wishes to retire earlier than normal and aims to pursue other hobbies that can be afforded through great wealth accumulation. Life is more than just working. Let’s think beyond the rat race.
  • How can I build a winner portfolio?

    The first $100,000 is the toughest to build in your portfolio. After that, it becomes a mindset of strategy & aggression to continue growing your equity. A successful $100,000 portfolio consisting of a combination of value & growth stocks that pay dividends will amplify your path to a $1,000,000 portfolio.
  • I don’t have any secrets. I’m no professional but I can successfully utilize resources at my disposal to maximize my chances at growing my portfolio to $1,000,000. It may or may not happen, but I have nothing to lose (except money I can afford to lose) along the way, by trying to make it happen.

    I consistently research and buy company shares that are priced at a good deal and have good management that runs the company. Building your portfolio to this milestone is going to require patience, a level headed mindset, time, and some luck.

You Will Incur Losses:
Society has long conveyed the idea that you have to work well into your prime years to maintain or exceed your current lifestyle. Recognize that the goal of investing is to buy you freedom one day. If you’re fortunate enough, you’ll be able to pass down wealth across multiple generations in your family. This journey is not for the weak hands – people who sell securities of companies at the first sign of trouble or volatility. In order to achieve this milestone equity balance, you need to be comfortable with experiencing bouts of volatility along the way – and there will be many. Just don’t be foolish enough to stash your entire life savings into the market – only invest what you can afford to lose. Berkshire Hathaway’s Vice Chairman Charlie Munger once said “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent”. This is what investing and life, in general, comes down to. No one knows the right answers, however, just don’t be stupid consistently.

As our world changes, I’m finding it absolutely essential to invest in companies that are tomorrow’s potential winners. Often times, these companies don’t portray a low PE ratio or proof of profitability. However, what they can often portray is a brilliant idea and innovation behind their business. Renewable energy is a good example. Many green energy companies have not posted record breaking profits like Apple or Amazon, but they are backed by good management, innovation, and most importantly, a vision for what they see the future to be. I see this industry in particular, growing tremendously in the coming decades as the world strives to move away from fossil fuels.

Innovation:
It is rare for me to invest in a company that doesn’t have the best fundamentals out there that currently make it a good investment. However, from time to time, I bet on the company’s vision, management, and innovation. I could lose my entire investment in this company, however, with careful research done on a company’s future plans and its pipeline, I can possibly strike it big. I’ll take my chances and I think you should too. I recently made an investment in a renewable energy company that is the largest manufacturer of windmill blades. Although this company doesn’t have a long or impressive track record of profitability, I’m betting that the future is green energy. Big oil isn’t going anywhere anytime soon, however, as global temperatures continue to rise, humanity will adapt and innovate like it always has. I may lose 100% of my investment if this company goes bankrupt or it may never be profitable, however, I will continue to own it in the coming decades. The key to growing your portfolio to $1 Million is to spend the extra hours to do research now and then sit back and observe your equity positions from a distance. Don’t trade often, but always observe.

Own As Many Assets As Possible:
Each small investing step taken now can compound into substantial returns over the long term. I think of the game Monopoly when I think about my investments. To dominate in monopoly, one of the tricks is to strategically buy every property you land on. To grow wealth, you want to own as many things as possible in life – whether it is stocks and/or real estate. A good investment will continue to pay dividends and compound on your returns, allowing you to pursue more hobbies sooner rather than later. Real estate could be another great cash generator. Hence, if and when advisable for your personal situation, own a property or multiple – whether you intend to live in it or rent it out to someone else. Either case, there is a high chance that the property will appreciate in value over time. A mortgage builds equity and allows for tax benefits at year end. Ownership also gives you full control and allows you to make decisions on your own terms, as opposed to renting under a landlord. 

Don’t Trade Often Or Speculate:
This point deserves to be revisited because it is the most common mistake amateur investors make. Too often, investors chase quick profits. Some recent examples are of bankrupt companies like Hertz and Eastman Kodak. Investors get burned because greed overtakes them and FOMO becomes rampant. The more you trade, the higher the chance that you are missing out on long term returns. Not to mention, you also will pay higher capital gains taxes on profits. 

DISCLAIMER:
This blog and the information contained herein is not a platform for guaranteed success on investments. The companies I mention in my posts are NOT recommendations for investments. The views expressed are my own and I strongly suggest to do your own research prior to making any decisions. Because the information on this blog is based on my personal opinion, research, and experience, it should not be considered professional financial advice. The blog is a discussion forum and not a website for access to financial data. I have no access to material non-public information nor any discrete information on publicly traded companies.

Advertisement

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s